Current Affairs 03 February 2026

Content

1. 16th Finance Commission & Urban Grants
2. Why are Tribals Protesting in Maharashtra?
3. IIT Council & Adaptive JEE
4. DAY-NRLM at Crossroads (2026–31 Cycle)
5. Mountain Gorilla Conservation & One Health Model
6. 16th Finance Commission on Exit Clauses

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16th Finance Commission & Urban Grants

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Fiscal Federal Context

• 16th Finance Commission (FC) report tabled in Lok Sabha sets tax devolution and local body grants framework, signalling stronger fiscal recognition of urbanisation, municipal finance needs, and decentralised service delivery.
• Commission recommended ₹3.5 lakh crore for Urban Local Governments (ULGs) over five years, reflecting unprecedented scale-up in urban fiscal support amid rapid urbanisation and infrastructure stress.

Background — Finance Commission & Urbanisation

Role of Finance Commission

• Finance Commission, under Article 280, recommends vertical and horizontal devolution, including grants to local bodies to strengthen fiscal capacity and cooperative federalism.
• Urban grants aim to improve first-mile infrastructure, service delivery, and municipal governance in water, sanitation, mobility, and local public goods.

Urbanisation Context

• India’s urban population projected near 40% by 2036, increasing pressure on urban infrastructure, housing, and services, necessitating stronger municipal finances.

Key Recommendations — 16th FC

Quantum of Allocation

• Recommended ₹3.5 lakh crore to ULGs for five years, roughly matching Centre’s share in centrally sponsored urban schemes over previous 13 years combined (Janaagraha analysis).
• Marks 230% increase over 15th FC allocation of ₹1.5 lakh crore (2021–26), signalling major fiscal shift toward urban governance.

Share in Local Body Grants

• ULGs’ share in total local government grants raised to 45% from 36% earlier, indicating prioritisation of urban governance alongside Panchayati Raj Institutions.

Urbanisation Premium Grant

• Introduced ₹10,000 crore urbanisation premium grant to incentivise planned rural–urban transition, supporting emerging towns facing demographic and economic transformation pressures.

Grant Design & Structure

Basic vs Tied Grants

• Over 60% grants categorised as basic grants; tied components target core services like water supply and sanitation, ensuring minimum service standards.
• Untied grants allow location-specific spending flexibility, excluding salary and establishment costs, promoting local prioritisation and accountability.

State-wise Trends

Distribution Patterns

• Kerala recorded >400% increase in allocation, reflecting demographic and urban governance indicators; suggests performance-sensitive distribution.
• Himachal Pradesh saw ~50% decline, possibly linked to lower urbanisation levels or revised formula weights.

Economic & Governance Significance

Strengthening Municipal Capacity

• Enhanced grants can reduce ULG dependence on State transfers, enabling better own-source revenue leverage, creditworthiness, and municipal bond potential.
• Supports decentralised delivery of public goods, improving urban productivity, livability, and economic competitiveness.

Urban Transition Support

• Urbanisation premium recognises migration-driven town growth, helping finance infrastructure in peri-urban and census towns lacking formal governance capacity.

Data & Evidence

Key Figures

• ₹3.5 lakh crore recommended for ULGs.
• 230% rise from previous cycle.
• 45% share of local body grants to ULGs.
• ₹10,000 crore urbanisation premium.
• >60% basic grants structure.

Challenges & Concerns

Implementation Risks

• Weak municipal capacity, staffing gaps, and planning deficits may limit effective utilisation of larger grants.
• Persistent low property tax collection efficiency constrains fiscal sustainability despite higher transfers.
• Risk of grant dependency without parallel reforms in revenue mobilisation and governance.

Way Forward

Reform Priorities

• Link grants with municipal finance reforms, digital property tax systems, and user-charge rationalisation.
• Strengthen urban planning, GIS-based asset mapping, and participatory budgeting.
• Encourage municipal bonds and credit ratings for large cities.

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Why are tribals protesting in Maharashtra?

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Why in News ?

Immediate Context

• Thousands of tribals from Palghar and Nashik undertook long marches in January 2026 demanding land titles, irrigation support, and livelihood security, over pending forest rights.
• Protests gained traction as both districts have high tribal populations and long-standing grievances over land ownership recognition and welfare access.

Background — Tribal Land & Forest Rights 

Constitutional Foundation

• Fifth Schedule mandates protection of tribal land and self-governance in Scheduled Areas, recognising historical injustice and need for cultural–economic safeguards.
• Article 244 provides administrative framework for Scheduled Areas, while PESA Act 1996 empowers Gram Sabhas over natural resource management.

Forest Rights Act (FRA), 2006

• FRA recognises Individual Forest Rights (IFR), Community Forest Rights (CFR), and habitat rights of Scheduled Tribes and Other Traditional Forest Dwellers.
• Objective is to correct historical injustice caused by colonial forest laws that alienated tribals from customary lands.

Core Issues Behind Protests

Land Title Concerns

• Tribals allege that titles issued contain incorrect formats, joint listings, or partial land recognition, restricting access to credit, schemes, and legal security.
• Many cultivators received titles for only fraction of land actually tilled, creating livelihood uncertainty.

High Rejection Rates

• Over 45% FRA claims rejected in Maharashtra, raising concerns about verification processes and interpretation standards.
• Out of 3,80,966 disposed claims, only 2,08,335 titles granted while 1,72,631 rejected, indicating significant exclusion.

Digitisation & Record Gaps

• Digitisation of land records reportedly caused mismatches between ground reality and official data, leading to claim denials and procedural delays.

Livelihood & Development Demands

Irrigation & Agriculture

• Protestors demand small dams and river-linking to divert west-flowing rivers for irrigating drought-prone eastern belts, enabling multi-cropping and income stability.
• Irrigation seen as critical for reducing dependence on rain-fed farming and seasonal migration.

Employment & Education

• Secure land rights linked to eligibility for institutional loans, schemes, and education benefits, making FRA implementation central to socio-economic mobility.

Governance & Policy Dimension

Implementation Deficit

• FRA implementation varies across States due to bureaucratic caution, forest department resistance, and differing interpretations of eligibility criteria.
• Gap exists between legal recognition and ground-level enforcement.

Ideological Tension

• Ecologist Madhav Gadgil noted tension between fortress conservation model and FRA’s community-based conservation vision.
• Debate framed as “conservation versus forest rights” reflects policy mindset conflict.

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IIT Council & Adaptive JEE

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Immediate Context

• IIT Council recommended exploring adaptive testing for JEE-Advanced to create a “better and less stressful assessment,” marking potential shift from uniform linear exams to technology-driven evaluation.
• Proposal includes a two-year transition (2026–2028) with optional adaptive mock tests from 2026 for calibration and familiarity.

Background — Competitive Exams in India

Linear Examination Model

• Traditional exams use identical question papers for all candidates, ranking based on correct responses, often encouraging rote learning and coaching-oriented test-cracking strategies.
• High-stakes nature means even marginal score differences shape career trajectories, intensifying exam pressure.

Need for Reform

• Concerns over exam stress, memorisation culture, and inequitable assessment of conceptual ability have pushed policymakers toward assessment reforms focusing on aptitude and reasoning.

What is Adaptive Testing?

Concept & Mechanism

• Adaptive testing uses Item Response Theory (IRT) where computer algorithms select questions based on candidate performance, dynamically adjusting difficulty after each response.
• Test usually begins with medium-difficulty items; correct answers lead to harder questions, incorrect ones to easier items, refining ability estimates iteratively.

Assessment Logic

• Goal is precise ability measurement using fewer but better-targeted questions, reducing fatigue while improving psychometric accuracy.
• Candidates may face different questions yet remain comparable on a common ability scale.

Advantages of Adaptive Testing

Pedagogical Gains

• Rewards conceptual clarity since only strong candidates progress to high-difficulty, high-weightage questions, discouraging superficial preparation strategies.
• Reduces random guessing and score inflation, improving validity of merit ranking.

Efficiency & Fairness

• Shorter tests with equal reliability lower candidate stress and logistical burdens.
• Fairness embedded in design as difficulty adapts to individual performance rather than post-test normalisation.
• Widely used globally for over 25 years in exams like GRE and GMAT.

Legal & Constitutional Concerns

Equality Debate

• Under Article 14, equality often equated with identical question papers; adaptive testing’s varied questions may face judicial scrutiny.
• Fairness must be demonstrated through transparent scaling and scientific validation.

Algorithmic Transparency

• Algorithm opacity could trigger bias or discrimination claims unless supported by equity audits and disclosures.
• Robust grievance redressal needed to reduce litigation risk.

Operational Challenges

Infrastructure Risks

• Requires reliable digital infrastructure, especially in tier-2/3 cities, as glitches could be challenged as maladministration.
• Data centre reliability, secure proctoring, and incident handling must exceed current standards.

Question Bank Development

• Needs large, calibrated item banks with difficulty indexing, syllabus coverage, and leakage-proof pretesting—technically and administratively demanding.

Transition Strategy

Phased Rollout

• Proposed two-year transition includes optional adaptive mock tests to familiarise students and refine item calibration.
• Gradual implementation helps build stakeholder trust and reduce resistance.

Learning from Global Practice

• GRE and GMAT experiences show acceptance improves with transparency, technical documentation, and consistent communication.

Broader Significance

Education Reform Lens

• Reflects shift toward competency-based assessment aligned with NEP 2020 emphasis on critical thinking over rote learning.
• Signals growing role of data science and AI in public examinations.

Safeguards

• Establish independent psychometric audits and publish methodology summaries.
• Ensure multilingual interface parity and accessibility.
• Strengthen legal frameworks and grievance mechanisms before full adoption.

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DAY-NRLM at Crossroads (2026–31 Cycle)

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Current Context

• DAY-NRLM is due for appraisal for the 2026–27 to 2030–31 cycle, prompting review of strategy to deepen women’s livelihoods, enterprise growth, and institutional sustainability.
• Programme recognised for mobilising women-led collectives and financial inclusion, but next phase demands institutional strengthening and market integration.

Background — DAY-NRLM  

What is DAY-NRLM?

• Deendayal Antyodaya Yojana–NRLM, under Ministry of Rural Development, aims to reduce rural poverty through SHG-based mobilisation, financial inclusion, and livelihood promotion of poor households, especially women.
• Focuses on social mobilisation, capacity building, credit access, and enterprise promotion using community institutions.

Institutional Architecture

• Built on three-tier structure: Self-Help Groups (SHGs) → Village Organisations (VOs) → Cluster-Level Federations (CLFs) ensuring decentralised, community-driven governance.

Scale & Achievements

Mobilisation & Financial Inclusion

• Around 10 crore households mobilised into 91 lakh SHGs, federated into 5.35 lakh VOs and 33,558 CLFs, making it one of world’s largest women-led networks.
• SHGs mobilised ₹11 lakh crore bank credit with only ~1.7% NPA, indicating strong credit discipline.

Women’s Economic Gains

• Lakhpati Didis exceed 2 crore, reflecting income enhancement and enterprise success among rural women.
• SHG participation linked to higher financial literacy and asset ownership.

Political & Social Empowerment

• Women’s collectives increasingly influence local governance and DBT delivery, with States using SHG networks for schemes like Ladli Laxmi, Maiya Samman, Ladki Bahin.

Core Concerns

Weakening Autonomy of CLFs

• CLFs reportedly becoming subservient to government functionaries, limiting independent decision-making and diluting community ownership model.
• Contradicts original vision of self-managed community institutions.

Idle Funds & Accountability

• Community institutions hold large capitalisation funds (reported ₹56.69 lakh crore), creating risks of idle funds and misuse without robust audits.
• Need for social and statutory audits to ensure transparency.

Credit Constraints

• SHG members seek higher credit for scaling enterprises but lack individual credit histories and CIBIL scores, limiting access to formal loans.

Financial & Institutional Gaps

Uniform Loan Products

• Standardised loan tenures and rates ignore diversity in livelihoods, reducing financial efficiency and suitability for varied enterprises.
• Community-led credit decisions could improve outcomes.

Limited Financing Models

• Heavy reliance on debt financing; limited use of equity, venture capital, and blended finance restricts enterprise scaling.

Need for Convergence

Siloed Implementation

• Livelihood schemes across departments operate in silos, reducing cumulative impact and causing duplication.
• Convergence often officer-driven and unsustainable.

Institutional Solution

• Proposed Convergence Cell at NITI Aayog could streamline multi-ministry coordination and resource optimisation.

Market Linkage Deficit

Marketing Barriers

• Weak branding, packaging, pricing, and logistics limit SHG product competitiveness in markets.
• Absence of dedicated marketing vertical reduces visibility and scale.

Proposed Solutions

• Dedicated national marketing vertical and State-level professional agencies could improve market access.
• Select CLFs as logistics hubs for aggregation and distribution.

Way Forward

Institutional Reforms

• Revitalise CLFs as community-owned institutions with autonomy and professional support.
• Strengthen audit systems and financial governance.

Financial Deepening

• Develop customised financial products, generate CIBIL scores, and partner with SIDBI, NBFCs, and neobanks.

Livelihood Planning

• Use Village Prosperity and Resilience Plans (VPRP) for annual livelihood planning and enterprise targeting.

Broader Significance

Inclusive Growth Lens

• DAY-NRLM supports SDGs on poverty reduction, gender equality, and decent work, making it central to inclusive rural transformation.
• Strengthened SHG ecosystems can drive rural entrepreneurship and local economic multipliers.

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Mountain Gorilla

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Current Event

• Global attention on Uganda’s mountain gorilla conservation due to recognition of Dr. Gladys Kalema-Zikusoka’s One Health model linking wildlife health, community health, and conservation success.
• Her decades-long work through Conservation Through Public Health (CTPH) is highlighted as a model for integrating conservation with livelihoods and disease prevention in biodiversity-rich developing countries.

Why is it in News?

Policy & Conservation Relevance

• Uganda’s mountain gorilla recovery showcases how community-based conservation, eco-tourism, and public health integration can revive critically endangered species even after political instability and poaching-driven collapse.
• Growing global focus on One Health, zoonotic disease risks, and human-wildlife coexistence makes Uganda’s gorilla model relevant for biodiversity policy and conservation governance debates.

Mountain Gorillas  

Species Basics

• Mountain gorilla (Gorilla beringei beringei) is a critically endangered great ape found only in Central Africa’s Bwindi and Virunga forests at elevations of 2,200–4,300 metres.
• Global population approximately ~1,000 individuals, making them among the rarest primates, with slow recovery due to low reproduction and high sensitivity to disturbance.

Ecology & Behaviour

• Occupy dense montane and bamboo forests; primarily herbivorous, feeding on leaves, shoots, and stems, playing ecological roles in seed dispersal and forest regeneration.
• Long birth interval of 4–5 years limits rapid population growth, increasing vulnerability to poaching, habitat loss, and disease.

Threats

• Major threats include habitat encroachment, poaching, civil conflict spillovers, and human-borne respiratory diseases due to close genetic similarity with humans.
• Historical poaching reduced Virunga population from 400–500 (1960s) to ~260–290 during political turmoil in the 1970s–80s.

Conservation Significance

• Gorilla tourism generates revenue and incentives for protection, similar to tiger tourism in India, linking conservation with local livelihoods.
• Considered a flagship species for biodiversity conservation, eco-tourism, and One Health approaches.

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16th Finance Commission on Exit Clauses

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Core Update

• The 16th Finance Commission (FC) has recommended “exit clauses” for cash transfer and subsidy schemes, urging States to avoid open-ended, unconditional freebies that strain fiscal sustainability and crowd out development spending.
• Comes amid a sharp rise in State-level Direct Benefit Transfers (DBTs) and subsidy schemes, especially ahead of elections, raising concerns about long-term fiscal health.

Why is it in News?

Fiscal Concern

• Several States have significantly increased cash transfer and subsidy outlays (2023–26 BE period), prompting the FC to caution against fiscally unsustainable welfare expansion without sunset or review mechanisms.
• The recommendation revives the debate on “freebies vs welfare”, fiscal discipline, and responsible public expenditure under competitive populism.

Background — Finance Commission

Constitutional Role

• Article 280 mandates the Finance Commission to recommend tax devolution and grants-in-aid, and increasingly to advise on fiscal sustainability and macro-stability.
• Though advisory, FC recommendations strongly influence Centre–State fiscal relations and budget priorities.

Key Observations of the 16th FC

Rise in Subsidy Burden

• States like Jharkhand, Odisha, and Madhya Pradesh have expanded DBTs and subsidies sharply, with some recording double-digit growth in cash support schemes.
• Such schemes risk creating structural revenue burdens rather than temporary social protection.

Exit Clause Logic

• FC suggests schemes should include sunset clauses, periodic reviews, and outcome evaluation, ensuring they do not become permanent entitlements without fiscal space.
• Aims to shift focus from consumption subsidies to capital and human development spending.

Economic Significance

Fiscal Sustainability

• Rising revenue expenditure on transfers reduces fiscal room for capex, infrastructure, and growth-enhancing investments, potentially weakening long-term State finances.
• Persistent freebies can increase debt–GSDP ratios and interest burdens.

Welfare Efficiency

• Well-designed welfare improves equity, but unconditional transfers without targeting or exit strategy may reduce efficiency and distort incentives.

Governance Dimension

Populism vs Responsibility

• Competitive populism among States risks a race-to-the-bottom fiscal strategy, undermining cooperative federalism and macroeconomic stability.
• FC stresses evidence-based welfare design, not politically driven expansion.

Way Forward

Reform Directions

• Introduce sunset clauses and beneficiary targeting.
• Link DBTs to human capital outcomes (health, education, skills).
• Strengthen fiscal responsibility frameworks at State level.

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